… STD BANK SA SEES TWO REPO RATE CUTS THIS YEAR

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... STD BANK SA SEES TWO REPO RATE CUTS THIS YEAR
... STD BANK SA SEES TWO REPO RATE CUTS THIS YEAR

Africa-Press – Eswatini. The Standard Bank in South Africa has forecast the South African Reserve Bank cutting it’s benchmark interest rate twice by year’s end. It is worth noting that the repo rate cuts in South Africa by extension would mean a repo cut in Eswatini.

This is simply because the two economies are intertwined through the pegging of the Lilangeni to the Rand and also because South Africa is Eswatini’s main trading partner. The Africa’s biggest lender (Standard Bank) by assets has pencilled in the first repo rate reduction in September as consensus builds in the financial services sector that help is on the way for embattled consumers. The bank’s Chief Finance Officer (CFO), Arno Daehnke, said in an investor call that SA’s post-election outcome was favourable for markets. “We expect a continued commitment to the fiscal consolidation plan and ongoing traction to the growth-supportive reforms underway. This should support moderating inflation and monetary policy easing. We expect 100 basis points (bps) of cumulative interest rate cuts,” Daehnke said.

Expect

“But we expect them to be spread, with two cuts of 25bps in the second half of 2024, starting in September, and two cuts of 25bps in the first half of 2025. We had previously expected 75bps in the second half of 2024 and 25bps in the first half of 2025.” According to Business Live, the forecast by the Big Blue, as Standard Bank is referred to in financial circles due to the size of its balance sheet, is in line with that of Nedbank, which this month said it expected the Reserve Bank to cut interest rates at least 50bps in the final four months of the year.

The SARB’s Monetary Policy Committee (MPC) kept the repo rate at 8.25 per cent for a sixth consecutive time at its most recent meeting in May. The committee’s next meeting is scheduled for July 16-18.

In his speech at the conclusion of the MPC’s May meeting, Governor Lesetja Kganyago said the bank expected inflation to return to the midpoint of its 3-6 per cent target band in the second quarter of 2025. The prime lending rate has risen 475bps since November 2021 to 11.75 per cent, which is 200bps higher than a few months before the Covid-19 pandemic erupted.

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